The effect of oil implied volatility and geopolitical risk on GCC stock sectors under various market conditions

The importance of crude oil volatility and geopolitical risk for stock pricing is well known in both developed and emerging economies, but is relatively understudied in major oil-exporting countries at the sectoral level of stock indices and under various market conditions. Using daily data on eight Gulf Cooperation Council (GCC) stock sector indices over the period February 2010–30 June 2022, we capture the effect of two global risk factors, namely oil implied volatility and geopolitical risk, on stock returns and volatility while accounting for bull/bear markets and low/high volatility regimes. The analysis indicates the following results. Firstly, the effect of oil implied volatility is stronger than that of geopolitical risk, notably for Consumer Discretionary and Staples. Secondly, the effect on both returns and volatility is generally positive during bull markets, but it is stronger for volatility;the response of the returns of Energy, Materials, Industrials, and Financials is negative in bear markets and positive during bull markets. Thirdly, the effect of oil implied volatility on stock sector volatility is slightly higher during the COVID-19 outbreak for some cases and is prominent during bull markets. Our findings matter for the predictability of GCC stock sector returns and volatility and for the design of hedging strategies under various market states. © 2023 Elsevier B.V.

On the relation between the crude oil market and pandemic Covid-19

PurposeThe crude oil market has experienced an unprecedented overreaction in the first half of the pandemic year 2020. This study aims to show the performance of the global crude oil market amid Covid-19 and spillover relations with other asset classes.Design/methodology/approachThe authors employ various pandemic outbreak indicators to show the overreaction of the crude oil market due to Covid-19 infection. The analysis also presents market connectedness and spillover relations between the crude oil market and other asset classes.FindingsOne of the essential findings the authors report is that the crude oil market remains more responsive to pandemic fake news. The shock of the global pandemic panic index and pandemic sentiment index appears to be more promising. It has also been noticed that the energy trader's sentiment (OVX and OIV) was measured at a too high level within the Covid-19 outbreak. Volatility spillover analysis shows that crude oil and other market are closely connected, and the total connectedness index directs on average 35% contribution from spillover. During the initial growth of the infection, other macroeconomic and political events remained to favor the market. The second phase amidst the pandemic outbreak harms the global crude oil market. The authors find that infectious diseases increase investor panic and anxiety.Practical implicationsThe crude oil investors' sentiment index OVX indicates fear and panic due to infectious diseases and lack of hedge funds to protect energy investments. The unparalleled overreaction of the investors gauged in OVX indicates market participants have paid an excessive put option (protection) premium over the contagious outbreak of the infectious disease.Originality/valueThe empirical model and result reported amid Covid-19 are novel in terms of employing a news-based index of the pandemic, which are based on the content analysis and text search using natural processing language with the aid of computer algorithms.

Covid-19 and oil and gold price volatilities: Evidence from China market.

Gold and crude oil are the influential commodities of the stock markets and real economy of the world in financial crises as well as in COVID-19 periods. However literature mainly focused on the effects of these commodities' prices only, and the volatilities in the prices of these commodities altogether with the prices got little attention. To fill in a major research gap, our study intends to estimate the dynamic relationship between oil prices, gold prices, oil prices volatilities and gold prices volatilities on the stock market of China. Using daily data over the period from 2009 to 2021, the study applied Autoregressive Distributed Lag (ARDL) bound test approach for the purpose of empirical estimation. Moreover, Non linear ARDL and asymmetric Causality analysis has also been applied for more comprehensive asymmetric estimation. The findings of our study indicated that gold prices and oil prices negatively affect stock market of China in the long run. In terms of implied volatility index of these commodities, study finds negative impact of price volatility of oil but positive impact of the price volatility of gold on the country's stock market in the long run. However, in the short run, only oil price and gold prices have significant effect on the China's stock market. On the basis of our findings, we recommend the investors to make rational decisions in response to the uncertainties in these markets and should consider gold as a safe haven to hedge themselves in times of uncertainty. Policymakers should take appropriate actions and adopt proper mechanisms for dealing with the quick uncertainty flow of information from the oil to the stock market.

In search of hedges and safe havens during the COVID-19 pandemic: Gold versus Bitcoin, oil, and oil uncertainty.

This paper investigates the potential hedging and safe-haven properties of several alternative investment assets, including gold, Bitcoin, oil, and the oil price volatility index (OVX), against the risks of the Saudi stock market and its constituent sectors in different phases of the COVID-19 pandemic. Using daily data, we employ the bivariate dynamic conditional correlation-generalized autoregressive conditional heteroskedasticity (DCC-GARCH) technique to model volatilities and conditional correlations. Our findings show that all investigated alternative investment assets had a time-varying hedging role in the Saudi stock market, which became expensive during the early stages of the COVID-19 pandemic. Our results also show that the optimal weights for gold were substantially higher than those of other assets, reaching a peak during the pandemic, implying that investors consider gold a flight-to-safety asset. Additionally, we find that gold and OVX were strong hedges and could have served as weak safe havens for investors during the early stages of the COVID-19 pandemic, while the remaining assets generally lacked these properties and could be merely used as diversifiers. Our empirical findings offer several key implications for policymakers and portfolio managers in Saudi Arabia that may be applicable to similar markets. In particular, we show that OVX-based products can serve as a promising hedging asset for stock markets in oil-exporting countries.

Asymmetric causality of economic policy uncertainty and oil volatility index on time-varying nexus of the clean energy, carbon and green bond

Vigorously developing the clean energy industry, improving the carbon allowance trading scheme, and issuing green bonds can effectively reduce emissions. To this end, this study aims to investigate the time-varying connections among clean energy, carbon, and green bonds through the DCC-MIDAS model, thus providing a bird's-eye view of their dynamic nexus. A non-parametric causality-in-quantile method is also employed to adequately capture the asymmetric causation of economic policy uncertainty (EPU) and the oil volatility index (OVX) on cross-asset correlations under different market conditions. The primary results imply complicated links among these three assets, with alternating positive and negative trends throughout the sample period. Notably, turbulence in financial markets can exacerbate network connectivity, particularly during the COVID-19 pandemic. Moreover, EPU and OVX can serve as strong predictors across various distributions of cross-market connections, which indicates that co-movement between assets is vulnerable to exogenous risks, especially under normal market conditions. Our findings have broader implications for market participants and policymakers.

Randomized, Double-Blind, Reference-Controlled, Phase 2a Study Evaluating the Immunogenicity and Safety of OVX836, A Nucleoprotein-Based Influenza Vaccine.

OVX836 is a recombinant protein-based vaccine targeting the highly conserved influenza nucleoprotein (NP), which aims to confer a broad-spectrum protection against influenza. In a Phase 1 study, OVX836, administered intramuscularly, has been found safe and immunogenic. The 90µg and 180µg dose levels were selected to be further evaluated in this randomized, monocenter, reference-controlled (Influvac Tetra™: quadrivalent seasonal influenza subunit vaccine), parallel group, double-blind, Phase 2a study in 300 healthy volunteers, aged 18-65 years, during the 2019/2020 flu season. Safety, influenza-like illness episodes (ILI; based on the Flu-PRO® questionnaire) and immunogenicity were assessed up to 180 days post-vaccination. OVX836 was safe and presented a reactogenicity profile similar to Influvac Tetra. It induced a significant increase in terms of NP-specific interferon-gamma (IFNγ) spot forming cells (SFCs), NP-specific CD4+ T-cells (essentially polyfunctional cells) and anti-NP IgG responses. OVX836 was superior to Influvac Tetra for all immunological parameters related to NP, and the 180µg dose was significantly superior to the 90µg dose for SFCs and CD4+ T-cells expressing IFNγ. Both the CD4+ T-cell and the anti-NP IgG responses persisted up to Day 180. An efficacy signal was observed with OVX836 at 180µg through reduction of ILI episodes occurring during the flu season as of 14 days post-vaccination. In conclusion, these results encourage further clinical evaluation of OVX836 in order to confirm the signal of efficacy on ILIs and/or laboratory-confirmed influenza cases. NCT04192500 (https://clinicaltrials.gov/ct2/show/study/NCT04192500).

On the relation between the crude oil market and pandemic Covid-19

Purpose - The crude oil market has experienced an unprecedented overreaction in the first half of the pandemic year 2020. This study aims to show the performance of the global crude oil market amid Covid-19 and spillover relations with other asset classes. Design/methodology/approach - The authors employ various pandemic outbreak indicators to show the overreaction of the crude oil market due to Covid-19 infection. The analysis also presents market connectedness and spillover relations between the crude oil market and other asset classes. Findings - One of the essential findings the authors report is that the crude oil market remains more responsive to pandemic fake news. The shock of the global pandemic panic index and pandemic sentiment index appears to be more promising. It has also been noticed that the energy trader's sentiment (OVX and OIV) was measured at a too high level within the Covid-19 outbreak. Volatility spillover analysis shows that crude oil and other market are closely connected, and the total connectedness index directs on average 35% contribution from spillover. During the initial growth of the infection, other macroeconomic and political events remained to favor the market. The second phase amidst the pandemic outbreak harms the global crude oil market. The authors find that infectious diseases increase investor panic and anxiety. Practical implications - The crude oil investors' sentiment index OVX indicates fear and panic due to infectious diseases and lack of hedge funds to protect energy investments. The unparalleled overreaction of the investors gauged inOVXindicates market participants have paid an excessive put option (protection) premium over the contagious outbreak of the infectious disease. Originality/value - The empirical model and result reported amid Covid-19 are novel in terms of employing a news-based index of the pandemic, which are based on the content analysis and text search using natural processing language with the aid of computer algorithms.

Examining the predictive information of CBOE OVX on China's oil futures volatility: Evidence from MS-MIDAS models.

This study evaluates whether CBOE crude oil volatility index (OVX) owns forecasting ability for China's oil futures volatility using Markov-regime mixed data sampling (MS-MIDAS) models. In-sample empirical result shows that, OVX can significantly lead to high future short-term, middle-term and long-term volatilities with regard to Chinese oil futures market. Moreover, our proposed model, the Markov-regime MIDAS with including the OVX (MS-MIDAS-RV-OVX), significantly outperforms the MIDAS and other competing models. Unsurprising results further confirm that OVX indeed contain predictive information for oil realized volatility (especially significant and robust in middle-term and long-term horizons) and regime switching is useful to deal with the structural break within the energy market. We carry out economic value analysis and discuss OVX's asymmetric effects concerning different trading hours and good (bad) OVX, and find OVX performs better in day-time trading hours and the good OVX is more predictive for the oil futures RV than the bad OVX. The further discussion also confirms our previous conclusions are robust during the highly volatile period of the COVID-19 pandemic.